Fiscal cliff legislation doesn't solve defense problem

'Cloud of uncertainty' remains; civilian workers face pain

Tuesday’s fiscal cliff legislation puts off $550 billion in defense spending cuts that would have started with the new year, but the Pentagon said Wednesday that the deal passed by Congress will likely have some effect on the fiscal 2013 defense budget and on planning for 2014.

Exactly what impact is unclear. Pentagon spokesman George Little said defense officials are waiting for guidance from the federal Office of Management and Budget. If no additional legislation is passed, the automatic spending cuts will occur March 1.

If the sweeping decade-long defense reductions, known as sequestration, had gone forward this week, the Pentagon planned to temporarily furlough civilian workers rather than ax uniformed troops.

Uniformed personnel were expected to be exempt from cuts in the first year of sequestration.

Defense Secretary Leon Panetta said Wednesday that over the past few weeks his office started looking at where the blow, which amounts to 10 percent of the military budget, would land.

“As we were forced to begin preparing to implement this law, my concerns about its damaging effects have only grown,” he said in a released statement.

“As an example, had Congress failed to act, I would have been required to send out a notice to our 800,000 civilian employees that they could be subject to furlough.”

In the San Diego region, more than 25,000 civilian workers are employed by the Defense Department and the U.S. Department of Veterans Affairs, according to figures from the San Diego Military Advisory Council.

One Navy official said that leaders there were feeling a tremendous sense of relief on Wednesday, despite knowing it was only short term. Without this reprieve, almost immediate cuts to operations and maintenance would have loomed, the official said.

Rep. Susan Davis, D-San Diego, voted for the legislation and said Wednesday that it buys time.

“Let's continue the bipartisanship and replace sequestration with responsible spending,” Davis said in a statement issued by her office. “I will work hard to ensure that we don't hurt San Diego's economy or our national security."

Others had few kind words for the legislation, saying it doesn’t solve the larger threat to the defense budget.

Rep. Duncan Hunter, R-Alpine, voted against the 11th-hour bill Tuesday. His spokesman said the “cloud of uncertainty” remains.

“Businesses and our military should find no comfort in the latest deal or somehow take it to mean that the threat of sequestration has been lifted,” Joe Kasper, Hunter’s deputy chief of staff, said in a written statement.

“Just as the case with taxes or business, there needs to be certainty and clear line of sight downrange for national defense. And we’re definitely getting neither as long as sequestration is on the horizon.”

SDMAC President Larry Blumberg said he is concerned that if the military cuts start in March, they will be compressed into the months left in the fiscal year – potentially becoming even more painful. In rough math, $55 billion over seven months equates to more than $7 billion a month.

He is not optimistic that the larger deficit issues – how to balance tax increases and spending cuts -- will be resolved in another two months.

For months, SDMAC and other business groups have warned that sequestration –- on top of roughly $500 billion in cuts the Pentagon voluntarily agreed to take over a decade -– would cripple the regional economy. About 300,000 jobs in San Diego County are tied to defense spending, so a 10 percent cut equals 30,000 positions.

On the other hand, military officials have long said they expected austerity measures after years of record-high defense spending.

The U.S. base defense budget was $297 billion in fiscal 2001. It grew steadily to $549 billion in 2011, not including war spending, according to Pentagon data.

By Wednesday afternoon, several defense contractors with operations in San Diego weighed in on the two-month reprieve. A spokesman with shipyard General Dynamic NASSCO said it wouldn't be appropriate to speculate on the future and it is proceeding with the business it has.

A spokesman for General Atomics Aeronautical Systems in Poway refused to comment. Northrop Grumman deferred to a statement issued by the Aerospace Industries Association.

"Delaying implementation of sequestration by two months does not eliminate the uncertainty facing our business leaders and our warfighters," the AIA statement reads. "If sequestration is not solved in the next 57 days, it would be an abdication of responsibility by the leaders of this country."

Shipbuilder Huntington Ingalls Industries indicated in a statement that it has work under contract for several years, but its suppliers could be at immediate risk.

"Many of them are already sole-source suppliers," the statement reads. "Sequestration's impacts could thin the shipbuilding supplier base and, over time, make the construction of ships and submarines more expensive."